According to a report by embroker.com, 90% of all startups failLinks to an external site.. As a student entrepreneur, you may look at such statistics and lose hope for your startup—or learn your lessons and do as Reid Hoffman did.
He founded a startup in 1997 that could connect individuals for professional networking, roommate matching, and online dating. Unfortunately, the platform, named SocialNet, never picked up. Mr. Hoffman later founded LinkedIn, whose success he credits to the lessons he learned from SocialNet’s failure.
But you don’t have to learn from your failures to succeed. You can pick lessons from failed startups and avoid the pitfalls in your entrepreneurship journey. Here are five failed startups and the lessons learned.
- Sprig: No Profits, No Business
Sprig attracted $56.7 million in funding from investors moved by its value proposition. The idea was to produce healthy food and deliver it on demand. The demand was there, but the challenge was to make a profit from individual deliveries.
The startup had no way to include associated costs into single meal prices without overpricing. Even with a $110 million valuation, Sprig had to close due to heavy losses. The lesson learned here is you can’t run a business without profits.
- Peppertap: Manage Growth Profitably
Everyone liked Peppertap’s promise of grocery delivery at the touch of a button. The company was running 100% inventory-free, and service delivery charges were very low. The model kept the local groceries and customers happy, but the discounted model meant losses for Peppertap from the word go.
The result was too many customers and more losses with every delivery. Peppertap had to close shop before losing all the $51.2 million investor capital. The main lesson here for entrepreneurs is to manage your startup’s growth profitably without getting overwhelmed.
- Doppler Labs: Don’t Compete with the Giants
Doppler Labs had a good product idea but was getting into the ring with the wrong opponents. The startup focused on building an earbud called Here One which had a built-in computer speaker and mic. Even with $51.1 million in funding, there was no way they could beat giants like Apple, Microsoft, and Google.
Production hitches delayed product launch and consumers discovered that AirPods came with better features than Here One. After picking the wrong battle, the founders learned that the hardware business was very hard.
Every startup should learn this lesson: if your competitors are giants, you better have a better product. For instance, online lenders competing with traditional lenders should have better offerings and services. They should improve loan accessibility by allowing applicants to access loans using simple search terms like “car title loan near meLinks to an external site..”
- Beepi: Manage Finances Well
Beepi had a revolutionary idea of selling used vehicles. When launching, the demand for used cars was high and the future looked bright. Investors loved the numbers so much that Beepi raised $149 million in a Series B funding round. Their idea was good, and the money was more than enough.
However, the founders micromanaged the company and limited its growth. Also, they became too excited about the money and wasted it. According to a TechCrunchLinks to an external site. report, the executives’ salaries were up to $7 million and the offices had $10,000 sofas. Investors sensed trouble and pulled out. Eventually, Beepi became a lesson for the imperfect execution of a good idea and gross money mismanagement.
- Juicero: Test Your Product
Juicero was founded in 2013 and targeted the luxury juice market. The product was a $699 remotely connected juicer with proprietary juice packs. It could squeeze more juice faster, the founder said. Doug Evans, the founder, got $118 million in funding.
However, Bloomberg revealed through a video that people could squeeze more juice fast by hand—without the expensive Juicero juicer. As Bloomberg squeezed Juicero out of existence, the founder learnt the importance of testing products and pricingLinks to an external site. before manufacturing.
Oregonstate News Blog 